Merchandising Operations and the Accounting Cycle - Pearson

Required
Journalize these transactions, first on the books of Drug Trading Co. and second
on the books of Merck Frosst Canada Inc.
Problem 5S-2 Journalizing purchase and sale transactions under the periodic inventory
system (Obj. S2)
Salimi Distributing Company Inc. engaged in the following transactions during
May of the current year:
May 3 Purchased office supplies for cash, $900.
7 Purchased inventory on credit terms of 3/10 net eom, $6,000.
8 Returned half the inventory purchased on May 7. It was not the inventory ordered.
10 Sold goods for cash, $1,350.
13 Sold inventory on credit terms of 2/15 n/45 for $11,700, less $1,800 quantity discount
offered to customers who purchased in large quantities.
16 Paid the amount owed on account from the purchase of May 7, less the discount
and the return.
17 Received wrong-sized inventory returned from May 13 sale, $2,700, which is
the net amount after the quantity discount.
18 Purchased inventory of $12,000 on account. Payment terms were 2/10 net 30.
26 Borrowed $11,760 from the bank to take advantage of the discount offered on
the May 18 purchase. Signed a note payable to the bank for this amount.
26 Paid supplier for goods purchased on May 18, less the discount.
28 Received cash in full settlement of the account from the customer who purchased
inventory on May 13, less the discount and the return.
29 Purchased inventory for cash, $6,000, less a quantity discount of $1,200, plus
freight charges of $480.
Required
1. Journalize the preceding transactions on the books of Salimi Distributing
Company Inc.
2. The note payable signed on May 26 requires Salimi to pay $90 interest expense.
Was the decision to borrow funds to take advantage of the cash discount wise or
unwise? Support your answer by comparing the discount to the interest paid.
Problem 5S-3 Journalizing purchase and sale transactions under the periodic inventory
system (Obj. S2)
Segal Furniture Company Ltd. engaged in the following transactions during July of
the current year:
July 2 Purchased inventory for cash, $1,200, less a quantity discount of $225.
5 Purchased store supplies on credit terms of net eom, $675.
8 Purchased inventory of $4,500, less a quantity discount of 10%, plus freight
charges of $230. Credit terms are 3/15 n/30.
9 Sold goods for cash, $1,800.
11 Returned $300 (net amount after the quantity discount) of the inventory purchased
on July 8. It was damaged in shipment.
12 Purchased inventory on credit terms of 3/10 n/30, $5,000.
14 Sold inventory on credit terms of 2/10 n/30, for $14,400, less a $900 quantity
discount.
16 Paid the electricity bill, $400.
20 Received returned inventory from the July 14 sale, $600 (net amount after the
quantity discount). Segal shipped the wrong goods by mistake.
21 Borrowed the amount owed on the July 8 purchase. Signed a note payable
to the bank for $3,867.50, which takes into account the return of inventory on
July 11.
21 Paid supplier for goods purchased on July 8 less the discount and the return.
Chapter Five Merchandising Operations and the Accounting Cycle 295